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What Are Bitcoin Mining Pools?

Mining pools occur when different entities partner to pool computing resources together to generate enough hash power to rival those of more sophisticated mining operations. Pool mining can be done by a third-party platform which serves as the coordinator that partners with solo Bitcoin miners. Aside from pooling computing resources together, a mining pool allocates work units to all individual miners on its platform while also analysing and recording the contribution of each node connected to its network. Its operation also helps to concentrate the hash power of all solo miners to find new block rewards. Miners are then rewarded based on their individual contributed hash power.

In distributing rewards, mining pools employ two major methods: pay-per-share (PPS) and proportional (PROP). The PPS system lets users withdraw their earnings instantly from the accepted shares of tasks they worked on. On the other hand, the PROP method allows users to withdraw only after completing a mining round. The amount each miner receives largely depends on the hash power they contributed to earning the block reward.

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